Nutritional High, Canada House Unit Form Oil Joint Venture

2017-10-17

Nutritional High International Inc. and Canada House Wellness Group Inc.'s wholly owned subsidiary Abba Medix Corp. have entered into a letter of intent (LOI) to create a joint venture to manufacture cannabis oil extracts and cannabis-infused products in Canada under the Access to Cannabis for Medical Purposes Regulations (Canada) (ACMPR).

Abba, a subsidiary of Canada House, and Nutritional High have agreed to form a joint venture company which will initially focus on building out an approximate 2,000-square-foot area at Abba's Pickering facility, to house a cannabis oil extraction operation focused on producing the oils and extracts currently permitted under ACMPR. As the Health Canada regulations continue to evolve, the joint venture will introduce additional products, all produced in accordance with good pharmacoepidemiology practice guidelines so it can sell internationally.

Nutritional High and Abba expect the joint venture to open up new avenues of enterprise for both companies combining Canada House's Canadian licensing, its ability to supply trim and shake at a low cost, and introducing its burgeoning patient base to Nutritional High's proven ability to extract top-quality, high-potency cannabis oil on a cost-competitive basis.

Larry Bortles, chairman of Canada House, commented: "The joint venture provides us with an opportunity to partner with experts in the extracts field and help Abba establish a strong market position in the highest-margin segment of the industry. In addition to allowing Abba to provide high-quality cannabis oil products to our patients, the relationship with Nutritional High will allow Canada House to share in what we believe will be a burgeoning adult extracts business as the recreational market opens up next Canada Day. We believe that Nutritional High's FLI brand will be well received in Canada and we look forward to working with Nutritional High to offer a wide range of high-quality and reasonably priced cannabis oil extract products, and down the road when permitted, edible products as well."

David Posner, chairman and co-founder of Nutritional High, commented: "We are very excited to partner with Canada House to enter the Canadian market. When we started Nutritional High in Colorado, we always looked to the day that we would have an opportunity to offer our oil extract and edible products in Canada. Consequently, we are delighted to partner with Canada House to do so. Once operational, we will offer products to their growing medical cannabis patient base and will be ready by Canada Day 2018 to offer an expanded menu of FLI cannabis extract products to the recreational market."

Since its inception, Nutritional High has been focused on developing, manufacturing and distributing products and brands in the marijuana-infused products industries in the states in the United States which have legalized cannabis for medical or adult recreational use. Nutritional High's focus has been on the cannabis oil extracts and cannabis-infused products, with its flagship project being the manufacturing facility in Pueblo, Colo., which houses a high-technology oil extraction operation that operates on semi-automated basis. Nutritional High has developed intellectual property relating to various extraction processes to produce high-quality cannabis oil with high THC (tetrahydrocannabinol) content and manufacturing processes to provide for reliable and consistent dosing.

Nutritional High has been evaluating a number of strategies to enter the Canadian market and determined that a partnership with a licensed producer such as Abba is the best way to leverage its expertise and IP (intellectual property) for the benefit of its shareholders, without requiring that it become a fully integrated licensed producer.

Canada House was formed in November, 2016, by the merger of three entities: Marijuana for Trauma Inc. with more than 7,000 active clients and a chain of 11 medical cannabis wellness clinics throughout Canada; Knalysis Technologies, with a massive and growing database on the efficacy of cannabis: how people are using cannabis and what is working to improve their health; and Abba Medix Corp., a licensed producer under ACMPR, which received a licence to cultivate cannabis on Sept. 1, 2017. Abba's facility is located in Pickering, Ont., which has a total footprint of approximately 50,000 square feet, of which approximately 22,000 square feet are currently occupied by Abba under a long-term lease. It is expected that Abba's facility will have an annual production capacity for over 13,000 kilograms of cannabis annually. Abba is currently finalizing the buildout of its facility and expects to commence the cultivation of cannabis by the end of calendar 2017.

Terms of the joint venture

The joint venture will focus on two main product lines: a line of products offered exclusively to existing Abba patients; and a line of FLI-branded products that will be offered to eligible patients across Canada and to the adult-use market, when permitted by regulation. The terms of the joint venture are as follows:

Nutritional High will provide sufficient financing to the joint venture on an as-needed basis to cover all costs in relation to establishing the oil extracts business and provide product formulations, testing procedures and manufacturing techniques, the continuing costs of which shall be covered by the joint venture.
Abba will lease the space required to the joint venture at the rate per square foot at which Abba is currently leasing its Pickering facility.
Nutritional High and the joint venture will enter into an exclusive licensing agreement whereby Nutritional High will contribute its intellectual property relating to its FLI brand to the joint venture, for FLI-branded products to be sold in Canada on exclusive basis.
Abba will suggest a limited menu of products (that is, oil tinctures and capsules) which will be manufactured by the joint venture for Abba medical patients on an exclusive basis.
The capital costs for establishing the joint venture shall be borne by Nutritional High, which shall receive a priority return until repaid, after which, all profits of the joint venture will be shared equally.
Strategic rationale

The joint venture offers a number of benefits to both Canada House and Nutritional High's shareholders:

It provides a cost-effective way for Nutritional High to enter the Canadian and international markets for the production of cannabis oils and edibles.
Nutritional High's FLI brand has been gaining recognition as one of the leading premium cannabis oils and extracts brands in Colorado, and rolling it out in Canada is expected to provide the joint venture with a strong competitive brand recognition on day 1.
Abba anticipates benefiting from Nutritional High's expertise in establishing extraction facilities in a cost-effective manner while focusing upon its core cultivation excellence, and realizing additional revenue from the sale of cannabis oils and edibles. The joint venture will employ leading-edge technologies and be in a position to enter the market in a strong position, while minimizing the learning curve.
By working together, Nutritional High and Canada House will be able to enter the extracts market on expedited basis -- with Canada House leveraging Nutritional High's expertise in the sector, and Nutritional High working with an existing licensed producer. Given the fact that the Canada House facility is located in close proximity to Nutritional High's corporate headquarters, the parties will be able to expedite the permitting process.
The joint venture intends to benefit from having both a ready supply of Abba's raw materials for extraction, and active purchasers from Canada House's Marijuana for Trauma's 7,000-client patient base. In addition, access to Marijuana for Trauma will provide it with leading market intelligence on the extracts market and allow it to develop the most highly sought-after products.
Since cannabis is legal for medical use on a federal level in Canada, the joint venture will be able to export to other counties, where permitted by applicable regulation, potentially exponentially increasing the size of prospective markets.
Note that final terms of the joint venture's Nutritional High licensing agreement are conditional on, among other things, the approval of Health Canada.
About Nutritional High International Inc.

Nutritional High is focused on developing, manufacturing and distributing products and nationally recognized brands in the marijuana-infused products industry, including edibles and oil extracts for nutritional, medical and adult recreational use. The company works exclusively through licensed facilities in jurisdictions where such activity is permitted and regulated by state law.

About Canada House Wellness Group Inc.

Canada House is the parent company of Marijuana for Trauma Inc., Knalysis Technologies and Abba Medix Corp. The company's goal is to become a marketplace leader through strategic partnerships, mergers and acquisitions to create a fully integrated cannabis therapy company.